Explain what decisions and calculations a very foresighted consumer must make to determine her consumption decisions in any period
What will be an ideal response?
An individual would have to calculate her financial wealth, housing wealth, and human wealth. Of course, this implies that the individual would have to form expectations of future interest rates, income, and taxes for the remainder of her working life. Once done, the individual would then calculate the amount of consumption per year she preferred given this total wealth. If in the current period, current disposable income is less than this level of C, she would borrow the difference.
You might also like to view...
Empirical support for the Heckscher-Ohlin model was weakest when the study applied
A) all of the assumptions of the model. B) all of the assumptions of the model except that regarding technology. C) all of the assumptions of the model except those regarding technology, goods and shipping costs. D) all of the assumptions of the model except those regarding technology, shipping costs and gravity. E) all of the assumptions of the model except those regarding shipping costs.
A drop in the user cost of capital will lead to an equal ________ in the MPK of profit-maximizing firms, requiring a ________ v*, thus ________ gross investment
A) drop, higher, boosting B) drop, lower, dampening C) drop, lower, boosting D) rise, higher, dampening E) rise, lower, boosting
What does a perfectly elastic demand curve look like? A perfectly inelastic demand curve? Explain
What will be an ideal response?
With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?
a. passage of legislation reducing the workweek to 30 hours. b. instituting a tax policy encouraging consumption at the expense of investment. c. instituting a tax policy encouraging investment at the expense of consumption. d. an increase in the marginal income tax rate, which would reduce the work effort of individuals.